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Ohio Takes Drug Price Measure to Voting Booth

A battle over a state ballot initiative aimed at lowering prescription drug prices
is ramping up in Ohio, less than a year after California voters rejected a similar
measure in one of the most expensive ballot measure campaigns ever.

More than $109 million was spent last year to defeat California’s Proposition 61,
which would have prohibited the state from purchasing prescription drugs at a higher
price than what the Veterans Affairs Department pays.

Ohio voters will take up a similar proposal in November amid growing public outcry
over the climbing cost of prescription drugs. The Ohio Drug Price Relief Act was
allowed on the ballot after an Ohio judge last year denied attempts by the Pharmaceutical
Research and Manufacturers of America (PhRMA) and other plaintiffs to keep it off.

Ballot Measures and Complex Policies

The California campaign, which subjected voters to a barrage of advertisements and
messages, has prompted questions about whether ballot measures are an appropriate
approach to the complex issue of drug pricing.

Ballot measures can be an effective way to address issues that legislatures have been
unable or unwilling to, John Matsusaka, executive director of the Initiative and Referendum
Institute at the University of Southern California, told Bloomberg BNA. However, they
have limitations with more complicated policy, he said.

“In my mind, ballot propositions are good for conceptual issues—do you want to limit
your property taxes, or do you want to have the death penalty or not,” Matsusaka said.
“I don’t think it’s good for detailed regulatory structures.”

Prop 61 and the Ohio Drug Price Relief Act were introduced by the nonprofit AIDS Healthcare
Foundation, which provides reduced-cost health care to people living with HIV and
AIDS, and advocates for a variety of related issues.

Tying the price of drugs purchased by the state to those paid by the VA could reduce
the cost of drugs for vulnerable populations served by state agencies, such as the
Ohio Department of Medicaid.

The VA receives a 24 percent discount on the list price of all prescription drugs
under federal law. Additional discounts are often negotiated for each drug, although
these are usually kept confidential. This makes the prices the VA pays for drugs among
the lowest in the country.

Ohio Taxpayers for Lower Drug Prices is backing the Yes campaign, Dennis Willard,
a spokesman for the group, told Bloomberg BNA. “It’s very simple,” he said. “If voters
approve this issue in November, then Ohio would pay the same prices for those drugs
as the VA.”

But Rachel Sachs, a professor at Washington University in St. Louis who studies health
law and food and drug regulation, said implementing such a law wouldn’t be simple.

“The problem is that the prices paid by the VA are not usually publicly known, and
nothing in the text of the state initiative requires pharmaceutical companies to disclose
those prices,” she said.

The state government would have to be aware of the prices the VA had negotiated to
demand that Ohio pay the same or lower prices, Sachs said.

The state could get around that issue by creating a third party to keep track of the
VA’s negotiated prices, Sachs said. But what also complicates matters is the VA’s
ability to walk away from negotiations with pharmaceutical companies.

Drug Prices and the VA

The VA has the power to determine which drugs it makes available for prescription
at VA facilities. Unlike Medicaid, which has to cover nearly all Food and Drug Administration-approved
drugs, the VA can choose not to include drugs it deems too expensive or not safe enough.

If a pharmaceutical company wants to gain access to the VA’s market, it has an incentive
to offer the VA a lower price on its drugs, Walid Gellad, a professor of medicine
and health policy and management at the University of Pittsburgh, told Bloomberg BNA.

However, opponents to the initiatives argue that drug companies could simply raise
their prices to the VA.

Veterans groups such as the California Veterans of Foreign Wars and Vietnam Veterans
of America came out against Prop 61 on that logic, and messaging by the No campaign
in Ohio seems to be taking a similar shape.

“It’s not clearly going to happen and we don’t know how much it’s going to happen,
especially if it’s only one state doing this,” Sachs said. “But that isn’t an idle
concern.”

Given these concerns, it is not clear how the Ohio Drug Price Relief Act would be
implemented, or what additional administrative actions, regulations, or laws would
need to be introduced for the state to abide by the VA price ceiling, Gellad said.

Beyond the issue of whether the policy would be implementable, Dale Butland, a spokesman
for the Ohio No campaign, criticized the initiative’s exclusive focus on drugs purchased
by the state. Butland said it would do little to bring down the cost of drugs for
people who don’t get their medications from state programs.

“Even if the drug companies could be forced to sell their drugs to the state at the
VA price, they certainly don’t have to sell drugs to people who are privately insured
at that price,”
Butland said.

Unprecedented Spending

The pharmaceutical industry has spared no expense to defeat the state initiatives.

Almost $130 million
was spent on the Proposition 61 fight, making it one of the most expensive ballot initiatives
in California history. More than
$109 million of that came from the No campaign—the majority of whose funds originated
with the pharmaceutical industry.

Drug companies are willing to spend that kind of money to stop a ripple effect of
measures like these from appearing across the country if one were to be successful,
Sachs said.

“The pharmaceutical industry’s resources are essentially endless,” she said. “And
to my knowledge, they have fought every single drug pricing bill no matter how expensive,
no matter how toothless, both at the state and the federal level.

“I think there’s an argument to be made that they fight it so that people won’t even
try,”
she said.

Future Fights

Pharmaceutical companies may be justified in fearing more such measures.

“We don’t want to just win in Ohio, which we expect to do,” Rick Taylor, a consultant
working on the Ohio measure for the AIDS Healthcare Foundation, told Bloomberg BNA.
“We want to win in Ohio and then go to the next state or two or three and keep this
momentum.”

And as public frustration with the pharmaceutical companies grows, lawmakers may find
that introducing legislation aimed at reducing the cost of prescription drugs yields
political advantage.

Sen. Sherrod Brown (D-Ohio) on June 15 introduced the
Stop Price Gouging Act, which would require companies to justify drug-price increases and impose penalties
for those deemed unjustified.

The Maryland General Assembly this year passed
a law allowing the state attorney general to prosecute drug manufacturers for imposing
an “unconscionable increase”
on drug prices. That law is being challenged in court.

Such actions by federal or state legislators are preferable to trying to solve the
problem through ballot initiatives, some said.

“It’s unfortunate that legislatures aren’t doing their jobs so that people seem to
feel the need to come in and do it for them,” Matsusaka said. “In an ideal world,
that’s not the way you’d want to do this.”

To contact the reporter on this story: Renee Hickman in Washington at
rhickman@bna.com

To contact the editor responsible for this story:
Paul Hendrie at
pHendrie@bna.com

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